Put Itself in Play?

Larry Barrett

Updated · Feb 12, 2008 shareholders received an unexpected gift Monday after Silicon Valley Watcher, a tech industry blog, reported the on-demand business applications vendor recently approached merger-crazy Oracle about a possible union.

The posting was then picked up by a variety blogs and Web sites, including Salesforce Times, a site started by “dedicated fans and customers” that purports to be the top source of news and content outside of’s own network.

According to a post written by Silicon Valley Watcher’s Tom Foremski, a former Financial Times columnist, a “reliable source” someone within or close to contacted Oracle executives to see if it had any interest in snapping up the Software-as-a-Service leader at $75 a share—a roughly 50 percent premium above its closing price Friday of $50.87 a share.

At the same time this report was making its way through the blogosphere, Piper Jaffray analyst Ajay Kasargod issued a research report in which he reiterated his “buy” recommendation on the stock as well his 12-month price target of $70 a share and lauded the potential new business the company could derive from its AppExchange platform.

The combination proved combustible. shares surged up more than 10 percent at one point in Monday trading before closing up $3.93, or 8 percent, at $54.80 a share.

Predictably, neither Oracle or had any comment on the report and subsequent stock spike.

“ does not comment on rumors or speculation,” a spokesman said in an e-mail to Oracle officials were also unavailable for immediate comment.

[cob:Related_Articles]One person who did have something to say on the matter was Cowen & Co. analyst Peter Goldmacher.

“[The stock] is up 10 percent on speculation from Silicon Valley Watcher…” he wrote in a research note. “While we would not be surprised if [] made such an overture, we would be very surprised if Oracle didn’t laugh them out of the building.”

“I think it makes zero sense,” he added. “[I have] no idea who starts this nonsense.”

Whether Oracle CEO Larry Ellison has any interest in adding to his company’s CRM portfolio—on-demand or otherwise—remains to be seen.

Along with the Siebel On-Demand pieces Oracle has accumulated and is busy integrating into its Fusion middleware platform, Ellison is also the majority shareholder in competitor NetSuite, which held its initial public offering in December.

But overlapping products and customers has never been of great concern to voracious Oracle.

Foremski argues the potential merger would make sense because it would provide Oracle with a strong brand in an on-demand application, a strong transition road map to cloud computing and a SaaS business model.

“Salesforce would benefit from Oracle’s dominant position in enterprise IT markets, which would help in convincing corporations that Salesforce is a scalable and viable enterprise solution,” he wrote.

In search of a new challenge?

He added that Benioff “needs a new challenge” as he “appears to be losing interest in Salesforce, or at least reducing his financial interest in the company at a rapidly daily rate. He has been selling 10,000 Salesforce shares every single day since November 14, 2006.”

Keep in mind Ellison proved seed money for both and NetSuite and both Benioff and NetSuite CEO Zach Nelson are Oracle alumnus.

Others are speculating that if Oracle were to acquire, Benioff would be a natural successor if and when Ellison finally sails off into the sunset.

Denis Pombriant, an analyst at Beagle Research Group, doubts the veracity of the rumored 50-percent premium, arguing that—from’s perspective—it’s too cheap.

“That’s interesting but $75 seems low,” he told “Marc could run Oracle at some point but $75 is too cheap. is the big new thing that Larry—in my opinion—would like to sell into every existing account he has and then some.”, unveiled in September, gives customers, developers and ISVs the ability to create custom applications and user interfaces using the service.

The on-demand application development platform also lets customers run multiple applications within the same instance, allowing all of a company’s applications to share the same security settings, data models and user interface.

“ is a baby,” Pombriant said. “It is not possible to price the company for the value of this asset and, therefore, $75 is cheap…no one at is loony enough to float $75 trial balloon because it would be snapped up and money would be left on the table.”

“ sells more DB seats and is a direct challenge to Microsoft,” he added. “ is the bigger prize.”

More Posts By Larry Barrett